Breathing space: Commercial paper rollover continues but rates are rising

Mumbai | Updated: November 22, 2018 5:51:17 PM

With close to Rs 80,000 crore worth of commercial paper (CP) issued by non-banking financial companies (NBFCs) estimated to have been rolled over or redeemed in November so far, the money markets are breathing easier.

SEBI, RBIParticipants said Rs 24,000 crore worth of CPs were issued on Tuesday, taking the tally for last three sessions to Rs 60,000 crore.

By Utsav Saxena

With close to Rs 80,000 crore worth of commercial paper (CP) issued by non-banking financial companies (NBFCs) estimated to have been rolled over or redeemed in November so far, the money markets are breathing easier. The estimated amount of paper due to mature in November is Rs 1.5 lakh crore, according to Edelweiss Equity Research.

Participants said Rs 24,000 crore worth of CPs were issued on Tuesday, taking the tally for last three sessions to Rs 60,000 crore. However, rates are rising and are about 100-120 basis points higher than they were even two to three months back. Highly-rated companies and firms backed by government or strong companies are paying anywhere between 8.7% and 9.2% for three month money. The others are shelling out as much as 9.5-10%, dealers said.

Last week, Bajaj Finance issued CPs worth Rs 600 crore, for a tenure of 91 days, at a coupon of 7.85%, according to the data from Clearing Corporation of India (CCIL). Shriram Transport borrowed 31-day money at 8% and raised Rs 950 crore. On Monday, HDFC borrowed Rs 200 crore for 360 days at 8.9%. “The fear of stress in CP redemptions seems to be abating and there’s good activity on the corporate issuer front. However, NBFCs are relatively small players today,” said a money market expert.

The volume of fresh issuances is comparable to August, just before Infrastructure Leasing and Financial Services (IL&FS) defaulted on commercial paper and jolting investor confidence for the next three months.

Experts believe it will take some more time before mutual funds regain the confidence to buy CPs of companies other than the highly-rated ones. Dealers said issuances by housing finance companies (HFCs) to have been be the most affected by the recent liquidity crisis in the market. Piramal Capital and Capital First were the only two HFCs to issue paper in the last few sessions.

 

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